Question

(IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $12,000 resulting in a single free cash flow of $16,678 after 6 years b. An initial outlay of $12,000 resulting in a single free cash flow of $49,615 after 12 years c. An initial outlay of $12,000 resulting in a single free cash flow of $108,969 after 23 years d. An initial outlay of $12,000 resulting in a single free cash flow of $14,318 after 5 years

Answer 1

To determine the IRR for each project, we need to find the discount rate at which the NPV of the project is equal to zero. The IRR for each project is as follows: a. 15.50% b. 8.69% c. 6.34% d. 7.63%

Step-by-step explanation:

To determine the Internal Rate of Return (IRR) for each project, we need to find the discount rate at which the net present value (NPV) of the project is equal to zero. In this case, the initial outlay is negative ($12,000) and the single free cash flow after the specified number of years is positive. We can use a financial calculator or Excel's IRR function to find the IRR for each project.

a. IRR: 15.50%

b. IRR: 8.69%

c. IRR: 6.34%

d. IRR: 7.63%